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Nov 8, 2012

China and India in Global Drug R&D Outsourcing

Find out how the two nations play different roles.

The rises of China and India as two key emerging markets provide enormous opportunities to both multinational drug companies and professional outsourcing service providers. However, there are significant differences between these two countries, in particular in the areas related to drug R&D. Although multinational companies now could have more choices than ever, China and India each actually play different roles in the long value chain of drug R&D.

We recently conducted an in-depth study and analysis on the drug R&D capability of China and India. This article summarized part of the results found in our study.

Current Service Capabilities

At present the most popular services offered by majority Chinese CROs are early-phase drug discovery research, such as lead generation and optimization, assays and assay method development, etc. Only a handful of them are able to provide advanced discovery research services, such as high-throughput/content screening, computer-aided drug discovery (CADD), and structure-activity relationship (SAR) study. However, more CROs in India than in China are able to provide integrated discovery services besides the routine medicinal chemistry research services that are also offered by the Chinese CROs. A number of Indian CROs also have internal R&D programs. They thus generally have stronger capabilities and richer experiences than their Chinese counterparts in the SAR-based lead optimizations and pharmacological property optimizations.

However, the service features in preclinical development in these two countries seem just opposite. China is currently leading over India in drug testing in large animals such as nonhuman primates, as a large number of Chinese CROs possess good capability in this area. But in the in vitro studies and in small animal in vivo testing, the two countries have almost equal service capabilities.

In clinical development, India currently is a more ideal choice than China in terms of the service capability, experience, and CRO choice. However, if considering the factor of the attraction of the local pharmaceutical market, China seems to be more attractive than India as its current pharmaceutical market is much larger than the Indian market and, more importantly, poised to still grow faster than India.

Besides the professional CROs, a number of Indian major pharma companies are also involved in R&D outsourcing services. In contrast, at present, none of the Chinese major pharma companies have dedicated divisions that provide R&D outsourcing services to multinational companies. As they started R&D earlier than Chinese companies and currently have products in middle-to-late development stages, many Indian drug companies have gained experience in most stages of the drug R&D value chain, whereas the majority of the Chinese drug companies are currently still significantly inexperienced, in particular in terms of their ability of moving a drug from one development stage to the next. However, China currently is becoming one of the most focused countries for global pharmaceutical and biotech companies to look for outlicensing or co-development opportunities for their new products, largely because of the attraction of its pharmaceutical market.

Major Pharma’s Different R&D Strategies

Attracted by the fast growth of the pharmaceutical markets in both China and India, coupled with the fact that the skills and experiences of the scientists in these two countries are fast catching up and have become acceptable, it appears to most major pharma companies that the full-scale drug R&D outsourcing practice in these two countries has now become not only feasible but also meaningful. However, major pharma companies have also been implementing different outsourcing strategies in these two countries.

For example, China has so far been the main place for global drug companies to source focused compound libraries, especially those derived from the natural products isolated and purified from the Chinese herbal medicines. In the past few years almost all major pharma companies have sourced various sizes of compound libraries from China through hiring hundreds of scientists in Chinese CROs. On the other hand, almost at the same time many major pharma companies have also forged long-term, close partnerships with a number of Indian companies including both professional CROs and drug companies for both discovery research and early phase development. Their collaboration even included risk-sharing components.

As the life science research and technologies in China are better advanced than in India, China possesses advantages for conducting drug R&D over India in that it provides ease for major pharma to form a networked partnership with a variety of desired local capabilities while it is still easy for them to establish their own R&D facilities in the country, a similar operating model to what they have been doing in their home countries. This advantage has indeed been attracting more and more major pharma companies, making them willing to be committed to big R&D investment in China. In contrast, in India they more tend to conduct R&D in a model of partnership with local companies. To a large extent, to these major pharma companies, China seems to be aligned better with their long-term growth goals than India.

Future CRO Market Growth Potentials

Click Image To Enlarge +

Figure. Growth trends of Chinese and Indian CRO markets

The last several years have witnessed the fast growth of the CRO markets in both China and India. According to our research, the current market size of the Chinese CRO industry is about $1.58 B. It has been growing in a CAGR of about 31% in the past five years. The current market value of the Indian CRO industry is about $1.3 B. Its CAGR in the past five years was around 21.5%. In the global CRO market, which, according to our research, is about $42 B at present, the Chinese and Indian CRO markets currently account for about 3.8% and 3.1%, respectively, or about 7% if combined together.

As both China and India currently still possesses a number of advantages over other emerging countries, there is almost no doubt that the CRO markets in both countries are expected to still experience healthy growth in the foreseeable future. However, as the Chinese pharmaceutical market is currently larger and still exhibits stronger future growth potential than the Indian market, and as targeting the local market will still be the key motivation of major pharma companies in all emerging markets, it is thus expected that the Chinese CRO market will likely still experience more robust growth in the near future than its Indian counterpart.

We thus forecast that the Chinese CRO market will likely grow in a CAGR of around 16% in the next five years or so and the Indian CRO market will likely grow in a CAGR of around 9% during the same time period. Accordingly, the market value of the Chinese CRO industry will likely reach close to $4 B by 2017 and the Indian CRO market will be likely around $2.2 B by then (Figure). According to our research, by 2017 China and India combined together will likely account for about 10% of the global CRO market.

Jim J. Zhang, Ph.D., is president and managing director of JZMed, a market research firm specializing in pharmaceutical outsourcing. This article is written partially based on the firm’s research report “The New Trends of Drug R&D Outsourcing in China and India.” Jim can be reached at jz@jzmedi.com or 1-518-477-4831.

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